The Russian Oil Sector: Finally Ready for Investors?

More than 10 years after Thane Gustafson characterised the condition of the Russian oil industry as ‘crisis amid plenty’, the situation has not changed for the better. Taking into account the huge resource potential, its performance is still far too weak. After a dramatic decline of oil output during the first five years of transition, production began to stagnate on a non-optimal level of about 300 mn tonnes per year. The main reason for this development is the absence of upstream investment due to an unstable institutional environment. Therefore, it seems to be necessary to implement new legal and tax instruments, which provide incentives to make Russian oil projects more attractive for investors, mainly foreign oil companies.